Law clears path for cheaper prepaid tuition plans

Published: Tuesday, June 17, 2014 at 2:01 p.m.

Last Modified: Tuesday, June 17, 2014 at 2:01 p.m.

Saving for your baby's university education is going to get a lot cheaper.

Thanks to legislation signed into law by Gov. Rick Scott last week, the Florida Prepaid College Board will be able to lower the cost of its four-year Florida University plan for the first time in five years.

"Because of this law, the prices of university Prepaid Plans will be significantly reduced, helping more Florida families save for their children's higher education," Florida Prepaid Board Chair Duane Ottenstroer said in a news release.

Since 1988, Florida Prepaid has allowed parents to lock in on a projected tuition rate set by actuaries for when their children will be in college. More than 1.6 million plans have been purchased since they first went on sale, with more than $6.7 billion invested.

Around 110,000 students are currently enrolled statewide in the state's public colleges and universities. The University of Florida had 11,665 students in 2012-13 receiving Florida Prepaid awards totaling $36.2 million, said UF spokeswoman Janine Sikes.

The prepaid board will set the new rates when it meets in September but estimated that it can lower the cost of the lump sum payment by $20,000 from the current $53,729. Monthly payments for the typical family plan would drop from $350 to $250 for the average four-year plan, said Shannon Colavecchio, spokeswoman for the board.

The new rates would take effect when the open enrollment period begins Oct. 1.

The rates are affected by three things, she said: current tuition, factors that go into estimating future tuition, and the investment yield.

"The difference was due to the differential tuition," Colavecchio said.

The board raised the rates several years in a row after the state enacted a law in 2008 giving universities the ability to raise tuition as much as 15 percent above the state-imposed tuition rate. When universities raised their differential rates, the board reset its predictive model and raised its enrollment costs, she said.

From 2010 to 2012, the cost of enrollment rose from around $45,000 to nearly $54,000 because of those tuition differential increases. In 2013, the board was able to hold the line at $54,000 because there was no differential increase, just a slight, less-than-2-percent increase for inflation.

The Legislature this year passed HB 851, which eliminates the cost-of-living adjustment on tuition and eliminates the tuition differential for all but two universities in the state system — UF and Florida State University. The Legislature lowered the schools' ability to raise tuition from 15 percent annually to 6 percent.

The changes also will enable the prepaid board to offer refunds and price reductions for about 50,000 families currently enrolled who bought plans after 2008, Colavecchio said. Refunds and/or payment reductions are expected for those who bought four-year university plans and 2+2 plans from 2011 to 2014, and for people who bought tuition differential fee plans purchased from 2008 forward, she said.

The best thing is people won't have to act to receive those rebates or payment reductions, she said. Payment reductions automatically will be applied to eligible account holders starting Sept. 20, and refund checks will go out four to six weeks later, she said.

<p>Saving for your baby's university education is going to get a lot cheaper.</p><p>Thanks to legislation signed into law by Gov. Rick Scott last week, the Florida Prepaid College Board will be able to lower the cost of its four-year Florida University plan for the first time in five years.</p><p>"Because of this law, the prices of university Prepaid Plans will be significantly reduced, helping more Florida families save for their children's higher education," Florida Prepaid Board Chair Duane Ottenstroer said in a news release.</p><p>Since 1988, Florida Prepaid has allowed parents to lock in on a projected tuition rate set by actuaries for when their children will be in college. More than 1.6 million plans have been purchased since they first went on sale, with more than $6.7 billion invested.</p><p>Around 110,000 students are currently enrolled statewide in the state's public colleges and universities. The University of Florida had 11,665 students in 2012-13 receiving Florida Prepaid awards totaling $36.2 million, said UF spokeswoman Janine Sikes.</p><p>The prepaid board will set the new rates when it meets in September but estimated that it can lower the cost of the lump sum payment by $20,000 from the current $53,729. Monthly payments for the typical family plan would drop from $350 to $250 for the average four-year plan, said Shannon Colavecchio, spokeswoman for the board.</p><p>The new rates would take effect when the open enrollment period begins Oct. 1.</p><p>The rates are affected by three things, she said: current tuition, factors that go into estimating future tuition, and the investment yield.</p><p>"The difference was due to the differential tuition," Colavecchio said.</p><p>The board raised the rates several years in a row after the state enacted a law in 2008 giving universities the ability to raise tuition as much as 15 percent above the state-imposed tuition rate. When universities raised their differential rates, the board reset its predictive model and raised its enrollment costs, she said.</p><p>From 2010 to 2012, the cost of enrollment rose from around $45,000 to nearly $54,000 because of those tuition differential increases. In 2013, the board was able to hold the line at $54,000 because there was no differential increase, just a slight, less-than-2-percent increase for inflation.</p><p>The Legislature this year passed HB 851, which eliminates the cost-of-living adjustment on tuition and eliminates the tuition differential for all but two universities in the state system — UF and Florida State University. The Legislature lowered the schools' ability to raise tuition from 15 percent annually to 6 percent.</p><p>The changes also will enable the prepaid board to offer refunds and price reductions for about 50,000 families currently enrolled who bought plans after 2008, Colavecchio said. Refunds and/or payment reductions are expected for those who bought four-year university plans and 2+2 plans from 2011 to 2014, and for people who bought tuition differential fee plans purchased from 2008 forward, she said.</p><p>The best thing is people won't have to act to receive those rebates or payment reductions, she said. Payment reductions automatically will be applied to eligible account holders starting Sept. 20, and refund checks will go out four to six weeks later, she said.</p><p>"We are just happy to see it more affordable," she said.</p>